The Architecture of Combination
“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” The words, attributed to Sun Tzu, take on particular weight at the deal table. A merger is not the purchase of a commodity. It is the fusion of organisms—people, processes, obligations, cultures. And like any operation on a living organism, it demands both the surgeon’s vision and the surgeon’s precision.
Why Mergers Fail
Peter Drucker spent decades observing how corporations grow, combine, and collapse. His conclusion was unsparing: “Most acquisitions fail because the acquirer falls in love with the idea of the deal instead of confronting its reality.”
More than half of all mergers fail to deliver the promised synergies. The reasons are prosaic. Not errors in the financial models. Not collusion by competitors. Simply: underestimation of the complexity of integration. Overlooked legal and tax risks. The collision of organizational cultures that looked compatible on paper.
Warren Buffett put it more bluntly: “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.” A merger with an entity burdened by hidden liabilities, toxic contracts, or tax risk is precisely such a business—only you discover it after the documents are signed.
Due Diligence as Intellectual Discipline
Andy Grove, the legendary CEO of Intel, formulated the rule: “Success breeds complacency. Complacency breeds failure. Only the paranoid survive.”
In the context of M&A, paranoia is a virtue. Due diligence is not a document review—it is the systematic search for reasons the deal might be a mistake. Hidden liabilities. Disputes that have not yet erupted. Change-of-control clauses in key contracts. Tax structures that looked lawful in the year they were created but now attract the interest of the authorities.
Charlie Munger, Buffett’s longtime partner, is fond of saying: “Invert, always invert.” Instead of asking “Why is this deal good?” ask “What would have to happen for it to be a catastrophe?” If the answers to that question are not frightening, the deal may make sense.
Structure as Weapon
Alfred Chandler, the business historian, argued that structure follows strategy—that the way an enterprise is organized derives from the goals it seeks to achieve. In mergers, this relationship is inverted: the structure of the transaction determines its legal and tax consequences for years to come.
Merger by acquisition or by formation of a new entity? What happens to licenses and permits? How do you protect creditors—and how do you protect the buyer from creditors he did not know about? What tax consequences will the chosen path trigger? These are not legal questions asked after the fact. They are strategic questions that should shape the transaction from day one.
Jack Welch, for two decades the CEO of General Electric, maintained that “strategy is simply resource allocation.” In a merger, the resource is not only capital—it is also time, management attention, capacity to integrate. A poorly structured deal consumes these resources long after the closing.
Time and Tempo
George Soros, reflecting on his investment philosophy, said: “It’s not whether you’re right or wrong that’s important. It’s how much you make when you’re right and how much you lose when you’re wrong.”
In M&A, time works similarly. Protracted negotiations erode value: management loses focus, competitors react, employees leave amid uncertainty. But haste is equally dangerous: closing a transaction before the risks have been properly identified is buying a pig in a poke—only for millions.
An experienced adviser understands this tension. He knows when to accelerate—and when to tell the client that it is better to walk away. Sometimes the best deal is the one that never closed.
After the Signing
Ray Dalio, the founder of Bridgewater, argues that “pain plus reflection equals progress.” The period after closing is often a time of pain: integration of systems, harmonization of procedures, the inevitable conflicts among people who yesterday worked in separate organizations.
But it is also the moment when all the shortcomings of the due-diligence process reveal themselves. Liabilities that should have been discovered. Risks that should have been priced and allocated in the agreement. Indemnification clauses that were never included.
A good transaction is one in which, the day after closing, both sides know exactly what they agreed to. A bad transaction is one in which the real negotiations begin only after the contract is signed.
Skarbiec Law Firm
Since 2006, we have advised on M&A transactions—from initial strategic analysis, through legal and tax due diligence, to negotiation of documentation and post-transaction integration support. We know that every merger is different: different objectives, different structures, different risks.
We do not promise that every deal will succeed—that depends on factors beyond our control. We promise that our client will enter the transaction with full awareness of what he is buying, what he is risking, and what options he has if reality turns out differently than expected.
“Plans are worthless, but planning is everything,” Dwight Eisenhower used to say. In mergers and acquisitions, this truth reveals itself with full force. Our task is to make the planning so thorough that even when plans change, the client remains in a position of strength.
